For years, digital assets have been viewed through the narrow lens of cryptocurrency speculation. Today, that narrative is rapidly changing. We were fortunate to be part of the panel discussion, “Digital Assets: The Next Phase of Integration,” at this year’s ETP Forum in New York City. In addition to our firm, the panel featured industry leaders discussing how digital assets will reshape financial markets.
While Bitcoin and other large digital assets remain important parts of the ecosystem, so is the infrastructure being built around digital assets — particularly exchange-traded products (ETPs), tokenization, stablecoins, decentralized finance (DeFi) and the regulatory frameworks needed to support institutional adoption.
The overarching theme was clear: digital assets are increasingly becoming a foundational component of modern capital markets rather than a niche alternative asset class. Below offers some of the highlights from the discussion.
The first wave of digital asset adoption was largely centered on Bitcoin. For many investors, Bitcoin represented either a speculative asset or a potential digital store of value. Today, however, the market has expanded significantly.
Institutional investors are increasingly evaluating assets such as Ethereum and Solana, not simply as cryptocurrencies, but as investments in blockchain-based technologies that support a growing digital economy. Investors are beginning to differentiate between various types of digital assets and the roles they play within the broader ecosystem.
This shift mirrors broader industry trends. Digital asset ETPs have grown substantially since the approval of spot Bitcoin products, while new filings increasingly focus on more sophisticated portfolio solutions.
As one panelist observed, digital assets are entering a "second generation" phase characterized by indexed products, active management, income-generating strategies and broader institutional participation.
Investor interest is being driven by two primary factors: diversification and innovation. Bitcoin continues to be viewed by many allocators as a macroeconomic asset with characteristics similar to digital gold. At the same time, other blockchain networks are increasingly being evaluated as investments in emerging technologies capable of disrupting traditional financial infrastructure.
A recurring theme throughout the discussion was that volatility, often viewed as a weakness of digital assets, can actually be a portfolio construction advantage. Because digital assets exhibit relatively high volatility, investors may achieve meaningful diversification benefits through relatively small allocations. There is a growing number of wealth management firms and institutional allocators that now recommend modest digital asset exposures within diversified portfolios. For many investors, the conversation is no longer about whether digital assets belong in a portfolio, but rather how much exposure is appropriate.
Perhaps the most universally supported theme from the panel was the growing importance of stablecoins.
For years, blockchain advocates promised that digital assets would transform financial services. Stablecoins are increasingly becoming the first large-scale example of that promise being realized. Stablecoins are digital tokens designed to maintain a stable value, typically linked to the U.S. dollar. Their utility lies in their ability to facilitate near-instant, low-cost transfers of value across borders, and they have already gained significant traction outside the U.S., particularly in regions where access to dollar-based banking services is limited. In many emerging markets, stablecoins have become an efficient way to access dollar-denominated liquidity and conduct cross-border transactions.
The broader market appears to be moving in the same direction. Stablecoins are increasingly being viewed as financial infrastructure rather than simply crypto trading tools, with growing adoption in payments, treasury management, and international settlements.
Some consider stablecoins akin to "tokenized cash," with an ability to settle transactions in seconds rather than days while dramatically reducing transaction costs. For institutional investors and corporate finance teams, stablecoins may ultimately become one of the most impactful applications of blockchain technology.
At its core, tokenization involves representing ownership of a real-world asset through a blockchain-based token. While stablecoins are a hot topic and the first use case of tokenization in the U.S., tokenization of other assets may ultimately have the most transformative impact on capital markets. These assets include funds, stocks, bonds, private credit investments or real estate holdings. Importantly, tokenization does not change the underlying economics of an asset. Instead, it changes the infrastructure used to transfer, settle and manage ownership.
Some compare tokenization to the shift from physical CDs to digital music files. The content remains the same; the delivery mechanism becomes dramatically more efficient. The substantial benefits include:
Perhaps most notably, tokenized assets can be programmed to perform certain functions automatically, opening the door to entirely new financial workflows.
The market appears to be gaining momentum. Tokenized assets have expanded rapidly over the past two years, with tokenized treasuries, commodities, stocks and exchange-traded funds (ETFs) all experiencing significant growth as institutional adoption accelerates.
Read "Tokenization and the Search for Liquidity: Bridging Public and Private Markets"
Decentralized finance, or DeFi, has often generated headlines for volatility and security incidents. However, many investors overlook its long-term potential. DeFi can be viewed as a collection of blockchain-based financial services that operate through software rather than traditional intermediaries. Lending, borrowing, trading and collateral management can all occur through programmable protocols.
Many DeFi applications are essentially modern versions of familiar financial concepts. Lending protocols, for example, often perform functions similar to traditional credit markets but with increased transparency and automation.
While risks related to cybersecurity, governance issues and the potential for excessive leverage remain, DeFi continues to mature and may become an important component of future financial infrastructure. The key challenge will be integrating traditional finance principles such as risk management, custody, compliance and investor protections into decentralized systems.
Read "From TradFi to DeFi: An Industry Veteran’s Take on Adoption and Convergence"
No discussion of digital assets would be complete without addressing regulation. The panel devoted significant time to discussing pending digital asset legislation and the industry's ongoing push for clearer regulatory frameworks.
While regulatory clarity is important, it may not be the primary driver of adoption. Institutional demand, technological innovation and market development are already advancing rapidly. Nevertheless, clear rules remain critical for several reasons:
For traditional financial institutions, regulatory certainty helps justify investments in infrastructure, technology and talent. It also provides confidence that innovation can occur within a stable legal framework.
One of the most practical discussions focused on accounting and operational challenges. While digital assets are often associated with technological innovation, successful institutional adoption still depends on solving fundamental issues around valuation, reporting and custody.
Valuation remains particularly complex. Unlike traditional securities that trade on centralized exchanges in a single jurisdiction, digital assets often trade across multiple venues and jurisdictions with varying liquidity profiles. Determining the appropriate market value under U.S. GAAP can therefore be more challenging than many investors expect.
Custody is also a continuing focus. Unlike traditional securities, many digital assets function as bearer instruments. Ownership is controlled through cryptographic keys, making cybersecurity and custody practices critically important. Institutional investors must understand how digital assets are stored, secured and verified before making allocations. As the industry matures, robust custody infrastructure may become one of the key enablers of broader institutional adoption.
As economic activity becomes increasingly digital, AI systems will require digital forms of money and digital infrastructure to transact efficiently. Whether through stablecoins, tokenized assets or blockchain-based settlement networks, digital assets may become the financial rails that support AI-driven commerce.
Taken as a whole, digital assets are no longer an emerging experiment. The industry has moved beyond proving the concept and is now focused on scaling practical applications. While questions remain around regulation, custody, valuation and market structure, the direction of travel appears increasingly clear.
The future of finance may not be purely digital, but it is becoming significantly more tokenized, programmable and interconnected. For investors, asset managers and financial institutions, understanding transformation is quickly becoming a strategic necessity rather than an optional exercise.
Contact Mike Dellavalle or a member of your service team to discuss this topic further.
In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.